Fast-typing Jason Snell has a transcript of Tim Cook’s remarks. Regarding the company’s projection that Apple Watch will have lower margins than the company’s average next quarter:

In the first quarter of any kind of product, you would always have
learning and these sorts of things. We’ve had this with every
product we’ve ever done. And so again, we’re not guiding to what
it will be over time, we’re talking about what it is now. I would
keep in mind that the functionality of the product that we’re
making is absolutely incredible, the power of it. And I’d also
say, generally there’s cost breakdowns that come out around our
products that are much different than the reality. I’ve never seen
one that is anywhere close to being accurate. And so if that’s the
basis of your comment, I’d really dig on the data if I were you.

Countdown to iSuppli projection that Apple Watch Sport costs the company $67 in three, two, one…

Regarding iPad sales:

When you look at the underlying data, it makes you feel a lot
better than the sales do. Things like first-time buyer rates, the
latest numbers from the U.S. are like around 40 percent, and when
you look at China they’re almost 70 percent. These numbers are not
numbers you would get if the market were saturated, so I continue
to believe — even though I’ve seen different people write that —
I think that theory is not correct. We also see usage numbers that
are off the charts, so far above competition, it’s not even in the
same planet. And we see customer satisfaction at or near 100
percent. So these kind of numbers, along with intent-to-buy
numbers, everything looks fantastic. So my belief is that as the
inventory plays out, as we make some continued investments in our
product pipeline which we’re doing, that we’ve already had planned
and have had planned for some time… I think still, I believe the
iPad is an extremely good business over the long term. When
precisely it begins to grow again I wouldn’t want to predict, but
I strongly believe that it will.

My reading on this: lots of people are still buying their first iPad — 40 percent of sales in the U.S., a remarkable 70 percent in China. So the market for “tablets” is not saturated. Usage numbers and customer satisfaction are high too, so it’s not that people who bought iPads previously aren’t happy with them. The problem, thus, is that older iPads continue to work just fine. People don’t replace them every two or three years like they do with their phones.